Global Portfolio Management (GPM) requires an acute understanding of the market in which investment is to be made. The major financial factors of the foreign country are the factors affecting GPM. The following are the most important factors that influence GPM decisions.
Tax rates on dividends and interest earned is a major influencer of GPM. Investors usually choose to invest in a country where the applied taxes on the interest earned or dividend acquired is low. Investors normally calculate the potential after-tax earnings they will secure from an investment made in foreign securities.
High interest rates are always a big attraction for investors. Money usually flows to countries that have high interest rates. However, the local currencies must not weaken for long-term as well.
When investors invest in securities in an international country, their return is mostly affected by −
● The apparent change in the value of the security.
● The fluctuations in the value of currency in which security is managed.
Investors usually shift their investment when the value of currency in a nation they invest weakens more than anticipated.